When refinancing makes sense (and when it doesn't)

Closing costs on a refinance typically run 2–4% of the loan amount. If your monthly savings are $300 and the closing costs are $6,000, you break even in 20 months, anything beyond that is gravy.

Use our refinance calculator to plug in your numbers. The break-even month is usually the most important number on the page.

The old rule was "refinance if you can drop your rate by 1%." It's a rough heuristic, not a law.

What matters is the dollar amount of monthly savings vs. the closing costs. A 0.5% drop on a $1M loan saves more dollars than a 1% drop on a $200k loan.

A rate-and-term refinance just changes the rate or term. A cash-out refinance also lets you take equity out, useful for renovations, debt consolidation, or buying a second property.

Cash-out refis usually have slightly higher rates and stricter LTV caps (typically 80% max). Compare against a HELOC or home equity loan for shorter-term needs.

If you've been paying for 7 years on a 30-year loan and you refinance into another 30-year, you've added 7 years to your debt timeline.

The fix is to refinance into a shorter term, say a 23-year, or to keep paying the higher amount on a 30-year, treating the savings as extra principal. Our extra-payment calculator helps you see the impact.

You're moving in <2 years. The break-even won't happen.

Your credit dropped significantly since the original loan. You'll likely be quoted a higher rate.

You have a VA or FHA loan with low rates. The streamline refinance options are usually a better path than a full conventional refi.

Get quotes from at least three lenders within a 14-day window. Multiple credit pulls in that window count as one inquiry.

Compare APR, not just rate. APR includes most of the fees and gives you a fairer apples-to-apples number.